The Dutch Innovation Box

As of 1 January 2017, the rules for the Dutch Innovation Box were amended in view of the Base Erosion Profit Shifting (BEPS) initiative. The EU Code of Conduct group and the OECD approved the changes and the Dutch Innovation Box is not considered harmful tax competition.

As result of the BEPS initiative, countries in the EU had to amend their domestic rules regarding preferential tax regimes. Qualifying Intellectual Property (IP) income in the Netherlands is subject to 5% tax instead of 25%.

The two other most important changes are:

the introduction of the Nexus Approach, which links the qualifying income to the taxpayer that incurred the costs and carried out the activities; and

the formal requirements needed to enter the preferential regime.

Under the BEPS initiative, to ensure that it is not classified as “harmful”, claims under the Innovation Box regime must be more closely aligned to actual Research and Development (R&D) carried out by the claimant.

There are also some additional rules that need to be taken into account when applying for the regime. Therefore, it is more important to consider whether applying for the Innovation Box will be beneficial prior to the start of the R&D activities.

Companies wishing to utilise this IP relief in the Netherlands should speak to an advisor who can liaise with the authorities on their behalf and determine qualifying expenditure.